Banks lag in low-carbon financing, report shows
Global banks provided only 89 cents in low-carbon energy financing for every dollar invested in fossil fuels in 2024, showing minimal progress toward climate goals, according to a new report from BloombergNEF released Thursday.
The fourth Energy Supply Banking Ratio report found that approximately 2,000 banks worldwide made little advancement in shifting financing from oil, gas and coal projects toward renewable energy solutions like wind, solar, and electrical grids. The 0.89:1 ratio represents just a one-cent improvement from 2023.
“The banking industry is not yet delivering the money needed to limit climate change,” the BloombergNEF report stated.
Bank financing for energy supply companies and projects rebounded to just over $2 trillion in 2024, reversing declines from the previous two years. The increase may reflect lower borrowing costs in major economies, with debt issuance rising approximately 18% for both low-carbon and fossil fuel issuers.
However, equity issuance patterns varied significantly. While fossil fuel companies saw equity issuance grow 62% last year, clean energy companies experienced a 15% decline. Project finance showed the opposite trend, with renewables receiving 11% more funding than the previous year while fossil fuel projects declined 19%.
Global ratio remains below 1:1
The global ratio has remained consistently below 1:1, meaning banks continue directing more money toward fossil fuels than low-carbon solutions. JPMorgan Chase, the largest energy supply financier, maintained an Energy Supply Banking Ratio of approximately 0.7:1 from 2021 to 2024.
BNP Paribas emerged as a notable exception, lifting its ratio above 2:1 in recent years from below 1.4:1 in 2021, primarily by reducing its fossil fuel financing portfolio.
Several major banks, including JPMorgan Chase, Royal Bank of Canada, Citi, and Scotiabank, have adopted or committed to disclosing energy supply ratio metrics following investor campaigns for increased climate-related transparency.
According to climate research scenarios, low-carbon energy supply requires approximately four times the capital investment as fossil fuels this decade to limit global warming to 1.5°C. This would necessitate an Energy Supply Banking Ratio of 4:1, far above current levels.
While global investment in low-carbon energy surpassed fossil fuel investment for the first time in 2024 with a ratio of 1.06:1, bank financing has lagged behind at 0.89:1.
The banking sector’s sluggish progress coincides with some institutions retreating from climate commitments. Major banks in North America, Japan, and Europe have exited the Net-Zero Banking Alliance since 2024, with some scaling back net-zero targets following political backlash against environmental, social and governance investment practices.
Despite these setbacks, BloombergNEF noted that many banks continue to pursue energy transition opportunities where the fundamentals for low-carbon solutions remain strong.
